In Unprecedented Case, Pharmaceutical Distributor Faces Criminal Charges Over Opioid Crisis

April 23, 2019 Updated: April 23, 2019

Federal prosecutors indicted a major pharmaceutical distributor on April 23 on criminal charges linked to the opioid crisis. The charges are the first ever brought against a pharmaceutical distributor for drug trafficking.

The U.S. Attorney’s Office in Manhattan charged Rochester Drug Cooperative (RDC), the sixth-largest pharmaceutical distributor in the United States, with conspiring to distribute drugs and defrauding the Drug Enforcement Administration (DEA). Prosecutors also charged two of the company’s former senior officials, Laurence Doud and William Pietruszewski.

The charges open up a new legal front in the government’s battle against the opioid crisis, which claimed the lives of 47,600 U.S. citizens in 2017 alone, according to the National Institute of Drug Abuse. Prosecutors charged RDC using the same statutes typically used against illegal street dealers and drug cartels.

The charges are the result of a two-year investigation that started when RDC violated the terms of a civil settlement. The distributor admitted to failing for years to report suspicious opioid orders to the DEA, enabling the operation of pill mills. Investigators noted that many suspicious pharmacies were welcomed with open arms by RDC after being cut off from other distributors.

RDC’s acting Chief Executive Officer John Kinney signed a deferred prosecution agreement on April 23, effectively admitting that the company committed the crimes. RDC agreed to pay $420 million to resolve the charges.

Deferred prosecution will allow RDC to keep operating for three years while subject to independent compliance monitoring. Geoffrey Berman, U.S. Attorney for the Southern District of New York, said that prosecutors opted for deferred prosecution since they believed RDC can be reformed through mandatory reorganization and monitoring. The distributor could otherwise go out of business, resulting in job losses for hundreds of people not implicated in the wrongdoing.

Doud, who had been RDC’s chief executive for more than 25 years, was charged with two conspiracy counts and plans to plead not guilty, according to his lawyer. Berman accused Doud of ordering RDC to supply pharmacy clients with opioids without due diligence. Doud acted out of greed, Berman suggested, pointing out that the executive’s salary more than doubled during the years of the alleged crimes.

Pietruszewski, the company’s former chief compliance officer, cooperated with prosecutors and pleaded guilty to three criminal counts.

RDC filled more than 1.5 million orders for controlled substances from pharmacy customers from 2012 to 2016, but reported just four out of more than 8,300 suspicious orders to the DEA. RDC’s sales of oxycodone and fentanyl skyrocketed from 2012 to 2016 by 800 and 2000 percent, respectively. The company generated more than $1 billion in revenue from the sale of controlled substances during that time.

“We made mistakes,” RDC spokesman Jeff Eller said in a statement. “We accept responsibility for those mistakes.”

Doud surrendered to authorities and faces charges of conspiring to distribute oxycodone and conspiring to defraud the DEA. The two charges, upon conviction, carry a mandatory minimum sentence of 10 years in prison.

Doud’s lawyer, Derrelle Janey, said Doud “is not the culprit here. We intend to fully defend against these charges.”

More than 200,000 Americans have died from overdoses of prescription opioids in the past 20 years; another 200,000 died from overdoses of illegal opioids. The two groups are linked since many of the victims of illegal opioid overdoses initially became addicted by using prescription painkillers.

Prosecutors specifically allege that RDC knowingly failed to report suspicious orders with the goal of protecting its high-volume pharmacy customers, who could be shut down if the DEA investigated the reports.

“Today’s charges should send shock waves throughout the pharmaceutical industry reminding them of their role as gatekeepers of prescription medication,” DEA special agent in charge Ray Donovan said in a statement. “The distribution of life-saving medication is paramount to public health; similarly, so is identifying rogue members of the pharmaceutical and medical fields whose diversion contributes to the record-breaking drug overdoses in America.”

Reuters contributed to this report.

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